People looking to file for bankruptcy are often worried about debt for which someone else has cosigned. The most likely situation is a car or mortgage, where the debtor has asked a friend or relative to guarantee payment.
When someone co-signs on a debt, that person guarantees that if you default then that person will make the required payments. The lender checks both the primary borrower’s and the co-signer’s credit before making the loan. Consequently, if the primary borrower defaults and the co-signer doesn’t fulfill the obligation, your credit will be affected as well. In the event the merchandise (car, etc.) is repossessed, it will show on both parties’ credit reports. This may have a negative impact on future borrowing.
But the fact that someone has cosigned for your loan does not make it more difficult for you to file for bankruptcy. Though the other person will be required to pay the debt after your case is completed, you can always voluntarily make the payments on your own. Remember, you are allowed to voluntarily repay a debt after bankruptcy – the case eliminates your legal obligation to do so.
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